Manpreet Gill, a leading investment strategist at Standard Chartered, has projected that emerging markets are uniquely positioned to capitalize on the weakening US dollar in the latter half of 2026. According to Gill, the dollar's decline will reduce debt servicing burdens for many emerging economies and boost commodity prices, creating a favorable environment for growth.
Key Drivers Behind the Dollar's Decline
Gill attributes the expected dollar weakness to a combination of factors, including the US Federal Reserve's pivot to a more accommodative monetary policy and narrowing interest rate differentials between the US and other major economies. He notes that the dollar has already depreciated by approximately 8% against a basket of emerging market currencies since early 2026, a trend he expects to accelerate.
"The cyclical shift in the dollar is providing a tailwind for emerging markets," Gill stated. "We estimate that a 10% decline in the dollar could boost emerging market GDP growth by an average of 1.5 percentage points over the following year."
Impact on Debt and Commodities
Many emerging market countries hold significant dollar-denominated debt. A weaker dollar reduces the real value of these liabilities, easing fiscal pressures. For instance, countries like Argentina, Turkey, and South Africa could see their debt-to-GDP ratios drop by 3 to 5 percentage points if the dollar remains weak. Additionally, commodity prices, which are often inversely correlated with the dollar, are likely to rise. This benefits major commodity exporters such as Brazil (iron ore, soybeans), Nigeria (oil), and Indonesia (palm oil, coal).
Investment Opportunities
Gill highlights several sectors poised to outperform. "We are particularly bullish on local currency bonds in high-yield emerging markets, as they offer both capital appreciation from currency gains and attractive carry," he explained. He also recommends equities in export-oriented industries, including energy and materials. The MSCI Emerging Markets Index has already risen 12% year-to-date, outpacing developed markets by a wide margin.
Risks to the Outlook
Despite the positive outlook, Gill cautions against complacency. Potential risks include a resurgence of US inflation that could force the Fed to reverse course, geopolitical tensions in Eastern Europe or the Middle East, and structural vulnerabilities in certain emerging economies. "Not all emerging markets will benefit equally," he warned. "Investors should be selective, focusing on countries with strong fundamentals and diversified export bases."
Regional Highlights
Gill identifies Asia as the strongest region, led by India and Vietnam, which have robust domestic demand and competitive manufacturing sectors. Latin America, particularly Brazil and Mexico, also offers opportunities due to commodity exports and nearshoring trends. Africa, while more fragmented, sees potential in countries like Kenya and Ghana that are undertaking pro-market reforms. He expects capital flows into emerging market stocks and bonds to exceed $200 billion in the second half of 2026.
